Profit and Loss Statement (P&L)
A profit and loss statement (P&L), also called an income statement, summarizes your business's revenue, costs, and expenses over a specific period, typically a month, quarter, or year. It shows whether your business made or lost money during that period.
Types
Revenue
All money earned from selling products or services during the period.
Cost of Goods Sold (COGS)
Direct costs of producing what you sold, including materials, direct labor, and supplies.
Gross Profit
Revenue minus COGS.
Operating Expenses
Overhead costs not tied directly to production, such as rent, admin, marketing, and insurance.
Net Income
What remains after all expenses. Positive means profit. Negative means loss.
Why it matters
The P&L is the most commonly reviewed financial report for small businesses. It tells you whether you are making money, where costs are rising, and whether growth is translating into profit or just more overhead.
Real-world example
A dry cleaning operator reviews their monthly P&L: $65,000 in revenue, $18,000 in supply and labor COGS, $32,000 in operating expenses (rent, utilities, insurance, admin), leaving $15,000 in net income, which is a 23% net margin.
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